MCA had issued notification vide GSR 464(E) dated on June 05, 2015, there are some confusion over on the notification, regarding applicability of particular sections and filing of forms with MCA in respect of Board Resolution and Shareholder Resolutions U/s 117 “Resolution & Agreements To Be Filed”. This article will deal with analysis each exemptions with regard to each sections notified vide GSR 464(E) dated on June 05, 2015.
The private companies while complying below exceptions, modifications, exclusions and exemptions, as specified here-in-below, shall ensure that the interests of their shareholders are sufficiently protected.
Will it applicable to all types of private companies…?
No, these, 16 exemptions will not be applicable to private companies which are subsidiary of public companies whether listed or unlisted.
Exemption No. 1: Section 2(76) (viii) – Definition of Related Party Transaction (RTP)
Section 2(76) (viii) – Definition of Related Party Transaction(RTP) shall not apply, that means any transaction between a holding, subsidiary or an associate company of such company or a subsidiary o0f a holding company to which it also a subsidiary shall not be treated as related parties. So private companies can enter transaction with above companies.
So private companies can enter transaction with above companies.
Exemption No. 2: Section 43 and 47 with respect to Kinds of Capital and Voting Rights
Section 43 and 47 with respect to Kinds of Capital and Voting Rights, provisions of kinds of share capital and voting rights shall not be applicable subject to the condition that such a provision is provided in MOA and AOA of the Company. That means MOA & AOA overrides the provision of Companies Act, these sections will only applicable if company MOA & AOA provides such provisions.
Exemption No. 3: Section 62(1)(a)(i) and Section 62(2) with respect to further issue of share capital (pertaining to right issue).
Section 62(1)(a)(i) and Section 62(2) with respect to further issue of share capital (pertaining to right issue).
Where ninety percent of the members of the Company gives their consent in writing or electronic mode, then the right issue can be kept open for a period lesser than 15 days and the notice shall be dispatched through registered post or speed post or through electronic means to all the existing shareholders for a period lesser than three days before opening of the issue.
Exemption No. 4: Section 62(1) (b) with respect to further issue of share capital shares (pertaining to ESOS).
Section 62(1) (b) with respect to further issue of share capital shares (pertaining to ESOS).
ESOS can be approved by way of an Ordinary Resolution instead of Special Resolution.
Exemption No. 5: Section 67 Restrictions on purchase by company or giving of loans by it for purchase of its shares.
This section shall not be applicable to a private company if all of the following conditions are fulfilled: –
1. In whose share capital no other body corporate has invested any money;
2. Borrowing from banks, FIs or any body corporate is less than
a) twice of its paid up capital; or
b) fifty crores rupees
Whichever is lower
3. Such a company is not in default in repayment of such borrowings subsisting at the time of making transactions under this section.
Exemption No. 6: Section 73(2)(a) to (e) Prohibition on acceptance Of deposits from public.
Section 73 (2)(a) to (e) shall not applicable to private companies and a private Company may accept money from its members up to 100% of paid-up share capital plus free reserve and a return is to be filed with Roc in form DPT-3, but Clause (f) of section 73 (2) still as same as per the Act.
Exemption No. 7:- Articles of the company overrides the below provisions of the Act.
Section 101- Shorter Notice
102- Explanatory statement
103- Quorum for the meeting
104- Chairman of the meeting
105- Proxies
106- Restrictions on voting rights
107- Voting by show of hands and demand of poll
109- Demand of poll
The above provisions shall be governed as per the Articles of the Company.
In case, there are no provisions related to section 101 to 107 & 109 in the Article, then provisions mentioned in the Act shall be applicable.
Exemption No. 8: Resolutions and Agreements to shall not be filed with ROC in MGT-14 as per section 117(3) g and Rule 8 of Companies( Meetings of Board and Its Powers) Rules 2014.
Private companies are not required to file MGT-14 with MCA on the transactions covered under 117(3) g read with rule 8 of meetings of board and its powers.
Exemption No. 9: Limit of audit as per section 141(3)(g).
As per section 141(3)(g) Eligibility, qualification and disqualification of Auditors, the following companies will not be counted for the purpose of audit in the maximum limit which they have twenty.
- One person companies,
- Dormant companies,
- Small companies.
- Private Companies having paid up share capital of less than Rs. 100/- Crore.
Exemption No. 10: Section 160 read with section 152 Right of persons other than retiring directors to stand for directorship
Deposit of Rs. 1 lakh or higher amount shall not be applicable to Private Companies.
As per section 152, private companies shall regularize such director at AGM without accepting deposit amount from him.
Exemption No. 11: Section 162 Appointment of directors to be voted individually at general meeting.
Private Companies can appoint two or more directors by way of single resolution.
Exemption No. 12: Restriction powers of Board as per section 180
As per section 180, certain power can only be execersied the the board of director with approval of members by way of special resolution.
Now, Section 180 shall not be applicable to private companies. Hence, for exercising all such powers, member’s resolution shall not be required.
Exemption No. 13: Section 184(2) – Disclosure of interest by director
As per this exemption, now director who is interested in any matter may participate in Board meeting in which such contract or arrangement is going to be discussed where he is interested after disclosure of his interest.
Exemption No. 14: Section 185- Loan to directors, etc.
This section shall not be applicable to a private company if all of the following conditions are fulfilled: –
1. In whose share capital no other body corporate has invested any money;
2. Borrowings from banks, FIs or anybody corporate is less than
a. twice of its paid up capital; or
b. fifty crores rupees Whichever is lower
3. Such a company is not in default in repayment of such borrowings subsisting at the time of making transactions under this section.
Exemption No. 15: Section 188(1)- Related party transactions
The whole section 188(1) shall not applicable to private companies. Further, Member of the private company can vote on such resolution, to approve any contract or arrangement which may be entered into by the company, if such member is a related party.
Exemption No. 16: Section 196(4) and (5) Appointment of managing director, whole-time director or manger
Shareholder’s approval for appointment of Managing Director, Whole-Time Director or Manger
and filing of Form MR 1 on this effect shall not be required in case of private companies, but for good corporate governance, it is better to get it done by Board of Directors.
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